Inventory Management Skills
Inventory management is the process of managing, ordering, storing, and using inventory. This involves the management of raw materials, finished products, and components, as well as warehousing, processing, and storage. Inventory management is an integral part of your supply chain. It includes managing purchases from suppliers and customers, maintaining stock and controlling product sales.
Inventory management refers to a systematic way of sourcing, storing and selling inventory, both raw materials (components), and finished goods (products).
Inventory management is a business term that refers to the control of inventory. It means having the right stock at the correct levels, in the appropriate place at the right price, and at the best cost. It is particularly difficult to balance the risks of stock shortages and undersupply for companies with complicated supply chains or manufacturing processes.
Inventory turnover is one measure of good inventory management. Inventory turnover is an accounting measure that measures how often stock has been sold over a given period. An organisation does not need more stock than it sells. Low inventory turnover can result in dead stock or unsold stock.
Inventory Management Importance
For a business to have enough stock to meet customers’ needs, it is vital that they have effective inventory management. Incorrect inventory management can lead to a loss of sales or the stocking of too many inventory items.
- This ensures that you will never run out of stock
- It will help you save money on storage
- It prepares for the unexpected
- It shows customer behavior trends
- It predicts the future
- It allows you to track the costs of goods sold
Benefits Of Effective Inventory Management
Retail success is dependent on your ability to keep track of your inventory. Your job at the most fundamental level is to provide the products that meet customer demand and reduce impact to your organisation. Below are some added benefits.
- There are fewer missed sales
- Better invested cash
- More precise reports
- Early detection of problems
- Happier customers
- It is easy to reorder
- Loss reduction and theft
- Information systems that are trusted
- Lower warehouse costs
- End of the year efficiency and cycle counts
- Peak season efficiency
Inventory Management Techniques
- Economic order quantity. The economic order quantity (or EOQ) is a formula that determines the optimal order quantity a company must purchase to support its inventory. It includes variables such as total cost of production, demand rate, etc.
- Minimum order quantity. The minimum order quantity (MOQ), on the supplier’s side, is the minimum amount of stock that a supplier will sell. The MOQ is the minimum order quantity that a supplier will sell to retailers.
- ABC analysis. Category A is your most valuable product that contributes the most to overall profits. Category B refers to products that are somewhere between the most valuable and the least valuable. Category C refers to small transactions that are important for overall profit, but not for each transaction.
- Just in time inventory management. JIT inventory management is a method that organises raw material orders from suppliers to be connected with production schedules.
- A safety stock inventory. Extra inventory ordered above the expected demand. This is used to prevent stock shortages that are often caused by inaccurate forecasts or unanticipated changes in customer demand.
- FIFO or LIFO.LIFO, or Last in, First out, assumes that the older inventory is sold first. LIFO prevents inventory from going bad.
- Order point formula. Reorder point formula is an inventory control technique that is based on the business’s purchase and sales cycles. It varies per product.
Inventory Management Summary
Every aspect of a company’s operations is affected by inventory management. The right inventory management system can make your business more efficient, meet customer demand, and remain competitive in the rapidly changing ecommerce environment. Inventory control can help you avoid making rash decisions, and it also helps you avoid overstocking inventory. Inventory control, as its name implies, helps you keep track of inventory levels to ensure you maximise your resources and prevent product spoilage.